Rising costs see number of Scottish SME house builders fall to 20-year low

It also wants government changes to support SMEs, such as a faster planning system, a review of regulation and new funding streams for building, including a ‘Sustainable Building Scotland Fund’.

Fionna Kell, director of policy at HFS, said: “Our small and medium home builders are facing a barrage of costs and delays that make it increasingly harder for them to deliver the range of homes that Scotland needs and to grow their businesses sustainably.

“Without a thriving SME homebuilding sector, many sites in rural and town-centre locations, or those on smaller or tricker pieces of brownfield land which require additional remediation, would just never be built.

“With national planning policy prioritising the development of brownfield sites in Scotland, we need to see government-backed funding solutions to increase the development of private and affordable homes by SMEs that face disproportionate infrastructure costs.”

She added: “Our members are committed to growing the sector and offering the wide array of socio-economic benefits SMEs bring to local communities.

“However, they require bold interventionist support, delivered at pace from both national and local government, if we are to fully realise this potential.”

The majority (88%) of SME house builders taking part in an HFS survey in May said their experience of building homes in Scotland had worsened since 2020.

Of the two-dozen HFS members surveyed, nine in 10 said government policies had a negative impact on business, with labour availability and material costs also seen as big hurdles.

Asked for the reasons behind these views, three-quarters of the constructors referred to the planning system and more than half cited government regulation.

More than half (58%) also estimated that new and planned rules since 2021 had added at least £20,000 to the cost of building a home.

The majority predicted that impending changes, such as the Building Safety Levy, Building Standard (Energy) Regulations and Passivhaus standard, would harm their businesses. Almost all respondents, 96%, said slow planning decisions were having a damaging impact on their firms.

The survey also highlighted the hurdles builders face in relation to infrastructure, land supply and development finance. However, most of the developers, which were collectively responsible for 12% of homes built in Scotland last year, were positive about their future potential, with three-quarters saying they had plans for growth or strong growth.

Màiri McAllan, the Scottish government’s cabinet secretary for housing, said: “SME house builders make a valuable contribution to the delivery of high-quality homes in communities across the country.

“Like many businesses and organisations, the economic climate is proving challenging for SME house builders. There is support available and we want to make sure that this is fully utilised.

“Planning has not created the housing emergency, but it is helping us to find solutions to the challenges we are facing. Our Planning and the Housing Emergency Delivery Plan sets out decisive actions we are taking right now with stakeholders to support housing development.

“The National Planning Hub focuses on housing together with renewable energy and is led by the Scottish government working in partnership with the Improvement Service. It aims to provide direct support to planning authorities for additional capacity and expertise.

“Developers share our determination to keep people safe, and the Building Safety Levy will ensure they make a fair contribution to the costs of remediating unsafe cladding, just as they will be doing in England.”